Technology, Consumer Stocks Lead Gains, But Cisco Falls After Earnings

Stocks closed higher Wednesday in a broad advance that made up some of the prior day's sharp losses. Technology and consumer stocks were leaders.

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Indexes faded a bit in the closing moments, but held the bulk of the day's gains. The Nasdaq composite — getting some help from a strong technology sector — climbed 0.6% and closed 0.2% away from erasing all of Tuesday's 0.8% loss. The S&P 500 bounced 0.4%.

The Dow Jones industrial average added less than 0.3%. Nike (NKE) was the best-performing Dow component. Shares broke out of a flat base and closed in buy range from the 70.35 buy point. Nike's breakout was symptomatic of strength in retail and other consumer stocks.

But small caps outperformed, with the Russell 2000 adding 0.9% and making a new high. The Russell seemed to benefit from strength in technology, which is the index's largest sector weighting. The small-cap benchmark leads the major indexes, which remain with deficits from their prior highs.

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Volume was lower compared with Tuesday's totals, according to early figures. But while volume left something to be desired, breadth was positive. Advancers led decliners by a 2-1 ratio on the Nasdaq and by 9-to-5 on the NYSE.

After the close, Cisco Systems (CSCO) reported earnings for the April-ended quarter. Shares fell 4% immediately after the report. Cisco closed regular trading near the 46.26 buy point of a cup with handle.

Steel, airline, data storage and chip equipment were some of the best performing industry groups in the stock market today.

In the steel industry, Steel Dynamics (STLD) broke out past the 50.80 buy point of an irregular base. Volume was only modestly above average, which dampened the bid for new highs. But the relative strength line also made a new high. Reliance Steel (RS) moved above the 93.83 entry of a cup with handle base. But the breakout also lacked vigorous volume.

Consumer stocks also led, with apparel stores, consumer electronics, RVs, leisure products and restaurants in the top 20 of 197 industry groups.

In biotechs, Codexis (CDXS) cleared a cup base with a 13.70 buy point. Volume was about 40% more than average. IBD 50 member Ligand Pharmaceuticals (LGND) climbed 4% and bolstered its breakout past 184.89. Volume was heavy and the RS line made a new high.

The yield on the benchmark 10-year Treasury note was little changed but remained near seven-year highs. A spike in rates Tuesday caused indexes and in particular some rate-sensitive sectors to fall.

Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice.